Qantas & China Eastern Scrap Joint Business Extension Application

October 25, 2023
MediaIntel.Asia

Summary Qantas Airways has withdrawn its joint business extension application with China Eastern Airlines after the Australian competition regulator announced its intention to block their cooperation on routes between Australia and China.
The Australian Consumer and Competition Commission is concerned that the collaboration could lead to price increases and impact fair competition, particularly as China Eastern Airlines is the sole carrier on the direct route between Sydney and Shanghai.
The regulator also expressed worry that approving the extension of the collaboration could limit the addition of extra flights and encourage both airlines to take measures that could increase prices, such as delaying or limiting flights. The collaboration between Qantas and China Eastern began in 2015.
On Tuesday, Qantas announced the withdrawal of their joint business extension application with China Eastern Airlines, which they had submitted to the Australian Consumer and Competition Commission (ACCC).
The ACCC's objection
The origin of this decision can be traced back to the announcement made by the ACCC last month. The organization declared its intention to block the coordinated cooperation between Qantas and China Eastern on routes between the two countries.
According to the draft decision released by the ACCC, the cooperation agreement is under scrutiny for potential violations of competition laws and potential adverse impacts on consumers. This agreement allows the two airlines to coordinate passenger and cargo transportation between Australia and China, and its current validity extends until March 2024.
Photo: Vincenzo Pace | Simple Flying
ACCC has noted that China Eastern is a government-owned airline and the sole carrier on the direct route between Sydney and Shanghai. Although Qantas plans to resume this route at the end of October, ACCC is concerned that this collaboration could lead to price increases and impact fair competition. Commissioner Anna Brakey stated,
"We believe that the cooperation between Qantas Airways and China Eastern Airlines could have adverse effects on competition that any potential benefits cannot offset. We are concerned that this cooperation could lead to both airlines raising prices."
The ACCC also pointed out that with the return of Chinese tourist groups, there is a growing demand for passengers on the Sydney to Shanghai route. ACCC is concerned that approving the extension of the collaboration may encourage the two airlines to take measures to increase prices, such as deliberately delaying or limiting additional flights (to maintain high fares). The two airlines have not provided evidence to ACCC that approving their joint venture would bring more flights to the China-Australia route.
The collaboration between Qantas and China Eastern began in 2015, and in 2021, ACCC allowed an unconditional extension, considering the pandemic situation at that time.
Photo: Angel DiBilio | Shutterstock
The history between Qantas and ACCC
This is not the only recent setback for Qantas. Last week, the airline announced that it would abandon its plan to acquire charter operator Alliance Aviation Services for AU$611 million ($387mn). The two companies had initially reached an acquisition agreement in May 2022. However, in April of this year, the ACCC rejected approval for the acquisition, citing concerns that the deal could lead to price increases and a decline in service quality.
Additionally, ACCC filed a lawsuit against Qantas in August, alleging that the airline had released false advertisements promoting flights that had already been canceled. If found guilty, Qantas may be liable for compensation of up to AU$600 ($381mn). Qantas' long-serving CEO Alan Joyce advanced his retirement following the scandal.
Source: Reuters

This data comes from MediaIntel.Asia's Media Intelligence and Media Monitoring Platform.



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